“B” Notice for 1099s

published October, 2008

If you issued 1099s in 2007 where the contractor name doesn’t match the tax ID number on file, the IRS has recently sent you a CP2100 notice. You’re supposed to do something with this.

Typically, this happens because someone gave you their personal Social Security number and their business name, or it could be a data entry error over at the IRS, or you could have copied the name or number down wrong.

You need to check the W-9 you have from the contractor against the IRS notice. If they have different numbers from what you reported, you’re done. Don’t do anything (except put the right name/number combination down NEXT year).

Don’t have a W-9 filled out by your contractor? Get one at: http://www.irs.gov/pub/irs-pdf/fw9.pdf?portlet=3.

If the IRS has what you have, then there’s a second step. If you’ve received a notice about this contractor twice in three years you have to do a further step that we won’t talk about here. See IRS Publication 1281 for further information.

Generally, if you get a CP2100 you have to begin “backup withholding” – you keep back 28% of the amount due and send it to the IRS unless you get a revised W-9 back from the contractor with a corrected number. You are supposed to mail out a “B” notice (see below) with a blank W-9 within 15 days, and they’re supposed to fill out the W-9 and return it within 15 more days. The envelope you mail this stuff in has to say “Important Tax Information Enclosed.” The new W-9 has to be written and signed (fax or PDF is OK by me) – you can’t just get the info over the phone.

The actual text of the “B” notice is on page 22-23 of Publication 1281 available at: http://www.irs.gov/pub/irs-pdf/p1281.pdf. The IRS doesn’t seem to include what you’re required to mail out with the CP2100 letter you get, so you’ll need this link to do what you’re supposed to do!

Don’t send the new W-9 in to the IRS. Don’t amend your 2007 1099s (unless the dollar amount was wrong).